European semiconductor equities advanced on Tuesday, recovering from recent weakness ahead of Nvidia’s quarterly earnings release on Wednesday. Shares of Aixtron, Suss Microtec, Infineon and Jenoptik climbed between 1.5% and nearly 3%, outperforming broader markets.
The Philadelphia Semiconductor Index (SOX) has surged more than 60% this year, with gains peaking at over 100% in June. The index pared some gains in July as investors questioned whether the substantial investments in artificial intelligence would translate into sustainable profitability for major U.S. chipmakers.
The primary driver of the rally remains robust demand for semiconductors tied to AI applications. UBS Chief Investment Officer Mark Haefele said in a note that AI-related capital expenditures are expected to remain resilient. While growth rates may moderate, large technology firms are projected to continue investing in data centers, AI infrastructure and related applications.
Based on recent guidance from major tech companies, Haefele estimates AI-related capex will reach $1.2 trillion in 2025, a 33% increase from this year’s projected $900 billion. The UBS outlook also anticipates stronger evidence of monetization, which could validate the scale of investments.
However, risks remain. Haefele warned that signs of declining capital spending, weaker demand for AI infrastructure or disappointing monetization could undermine confidence in the sector’s growth cycle. Such a shift could not only pressure technology stocks but also weigh on broader equity market sentiment.
